Question : Which ratio would be get by dividing net credit sales by the average debtors?
Option 1: Current ratio
Option 2: Return on the sales ratio
Option 3: Debtors turnover ratio
Option 4: Average receivables
Answer (1)
24th Jan, 2024
Correct Answer: Debtors turnover ratio
Solution :
The debtors turnover ratio, also known as the trade receivables turnover ratio, is a financial analysis technique that determines how frequently debtors are converted into cash on average over the course of a year.
Debtors' turnover ratio is calculated by dividing net credit sales by average debtors.
Hence option 3 is the correct answer.
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